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Chemical Industry Update - March 2020

March 12, 2020

by Troy M. Keller, Daniel J. Brown, Ray Liu, Kent J. Schmidt, and Rachel Benedict

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Top COVID-19 Updates for the Chemical Industry

In this issue, we pull together an assortment of recent updates and observations from our firm regarding the legal and economic fallout arising in the wake of COVID-19. We comment on litigation trends, contract law impacts, SEC reporting, travel restrictions and even management of construction projects. Clearly, China has been hard hit by the virus, and we discuss impacts on trade with that country and some of the challenges in managing operations there during the crisis.

Like other crises, we believe this one will pass in due course, but it will leave behind scars that change the way companies do things going forward, particularly in how they manage risk. Practices and policies regarding contractual protections, corporate disclosures, insurance strategies, supply sourcing and inventory levels will evolve as a result. Even Board governance is expected to be influenced as directors look for guidance on how they can best fulfill their fiduciary duties and address expanding expectations for corporate social responsibility in a world where the risk of pandemics has become a top priority.

We hope you find these updates useful. We are also interested in hearing from you. Let us know what you are seeing and most worrying about. We would be glad to organize impromptu peer-group discussions and forums to help companies arrive at best practices.

For more information, contact Troy Keller.

Ten Tips for Safeguarding Against Contract Performance Risks Related to COVID-19

As COVID-19 (coronavirus) continues to exact a significant toll on economies and supply chains globally, how can your business protect its contracts and mitigate risks? Here are the top 10 things your business can do immediately to better guard against contract performance risks related to the COVID-19 pandemic.

  1. BEFORE performance is interrupted (right now) assess and document COVID-19’s impact on your ability to perform obligations under your contracts. As the number of confirmed COVID-19 cases multiplies each day, it is likely that global supply chain disruptions have yet to peak. Thus, it is possible that the interruptions your business is currently experiencing may intensify in the coming weeks. Take time now to institute a policy for evaluating disruptions to your supply chain and the delays/failures of your upstream and downstream partners.
  2. Retain counsel, or ask in-house counsel, to review relevant contracts for force majeure provisions. Far too often parties agree to boilerplate force majeure language with little negotiation. Do not wait until you or your contract partner invokes force majeure to determine if your business’s relevant contracts offer sufficient protection in the event of a COVID-19 performance failure. Read More >

For more information, contact Dan Brown and Shevon Rockett.

Product Liability Risks for the Industry from COVID-19

In what is likely the first consumer class action lawsuit relating to the coronavirus, a manufacturer of hand sanitizers was sued on a theory that it is marketing its hand sanitizers in a deceptive manner. Plaintiffs claim the manufacturer is seeking a windfall from the health crisis by falsely claiming that their product is effective against the virus and point to the fact that the FDA issued a warning letter on this topic in January. The case, filed in federal District Court in the Southern District of California, is likely the first of many such claims.

Due to the number of chemical compounds that are incorporated into personal care and cleaning products, there is risk that these types of claims could proliferate into other product segments and have an impact on downstream markets for the chemical industry. Relatedly, several state attorney generals have announced their intention of punishing price gouging during this time of crisis, including with respect to cleaning products and hand sanitizers. Upstream companies may consider implementing policies to make clear that they do not support price gouging or false claims about end products and to consider including additional liability provisions in their terms and conditions to cover these areas.

For more information, contact Kent Schmidt.

Coronavirus and Contractual Performance Disputes—Does a Pandemic Excuse Performance of Contractual Obligations?

The daily headlines are reminders of the far-reaching economic ripple effects of the 2019 Novel Coronavirus (COVID-19) outbreak. The pandemic is forcing companies to abruptly alter strategies and business plans that seemed certain even at the beginning of the year. These types of changes prompt a question relating to whether this unprecedented health crisis alters existing contractual obligations. Can a company suspend performance of a contract or even terminate the agreement altogether because of the impacts of the coronavirus?

In many instances, the answer to this question is in the affirmative, and unequivocally so. A party to a contract may argue that, as a result of the outbreak, performance of its contractual duties is now impossible, impractical or at least economically infeasible. But applicable law, contractual provisions and the parties’ course of dealing before and since the outbreak will in some cases make the answer far from clear, in which case the dispute may escalate to litigation. With the possibility of litigating these sensitive issues on the horizon, it is useful to examine the legal principles that govern contract disputes stemming from the current health crisis.  Read More >

For more information, contact Kent Schmidt.

Three Ways China Trade is Impacted by COVID-19

The Chinese government’s announcement that it will reduce tariffs by 50% on about $75 billion of U.S.-origin products, affecting about 1,700 different customs codes, should be seen in at least three different perspectives. First, it is a sensible and practical move if China is to meet its very ambitious purchasing commitments as set forth in the recently signed Phase One trade agreement with the United States. Since tariffs automatically increase the cost of imported goods (in this case, into China), it would be inherently contradictory public policy to want more Chinese purchasers to buy American products and yet at the same time to make them more expensive than necessary because of such tariffs. However, even with these efforts to reduce tariffs, there are still many skeptics who believe China will have significant difficulty reaching those Phase One goals.

Second, given the current coronavirus epidemic and the unprecedented lock-down and quarantine of some 60 million or more Chinese citizens, especially across Hubei Province and in its capital city Wuhan, the Chinese government especially wants to project a sense of calm, order and strength at this time. It therefore wants to show its own citizens and the world that, in spite of that admittedly grave national health emergency, it can still carry on “business as usual” and is not flustered or distracted.

Third, the coronavirus problem is already widely expected to hurt China’s domestic economy. Tens of millions of Chinese workers have been ordered to stay home on an extended Lunar New Year break in an effort to reduce the risk of human-to-human transmission of the disease. Their lost hours of work will be significant in the aggregate and will clearly lower national productivity in 2020 and thus lower corporate revenues and earnings. When all of these adversely affected Chinese companies tally up those losses, that will likely lead to tightened budgets that will lead in turn to lowered purchases, especially of relatively more expensive imported goods.

Thus, if China hopes to have any chance of meeting its Phase One agreement import commitments, it has to adjust for those economic headwinds, and so these efforts to reduce tariffs are probably calculated to reinforce the government’s recent injection of more liquidity into the Chinese financial system.

For more information, contact Nelson Dong.

Key Things Employers in China Should Know Regarding Reopening Amid COVID-19

Due to the outbreak and rapid evolvement of the novel coronavirus, the central government and its local counterparts in China have taken a series of actions to contain the spread of the virus, including extending the Spring Festival Holiday, ordering enterprises to put off the schedule of business reopening and encouraging employees to work from home. Now, with the growth of virus infection gradually slowing down, local governments in various locations (including Beijing, Shanghai and Guangdong) have allowed and even encouraged business entities to resume their operations.  At the time of this article, a large number of companies and factories have already reopened their businesses with more to follow in the coming weeks.

With massive employees swarming into offices and factories, employers in China now face significant challenges in preventing and controlling the spread of coronavirus at workplace. Several workplace infection cases have been reported recently, under which employers had to suspend their business operations and invest additional funds and resources to cooperate with the disease prevention and control requests from the government. Read More >

For more information, contact Ray Liu and Yan (Bill) Huang.

President Trump Announces European COVID-19 Travel Ban

In a Wednesday, March 11, 2020 evening address from the Oval Office, President Donald Trump announced a new coronavirus-related travel ban barring entry to the United States for most foreign nationals who have visited various European countries within the past 14 days. The White House subsequently posted the full text of the proclamation. Read More >

For more information, contact Rebecca Bernhard and Bob Webber.

What Construction Contractors and Owners Should Do, Today, to Prepare for the Possible Effects of Novel Coronavirus on their Projects

As novel coronavirus has spread from China to Europe, the United States and around the globe, it has begun to have a debilitating impact on world markets, manufacturing, distribution, supply chains, and the workforce in general. It seems only a matter of time before COVID-19 directly affects U.S. construction projects. What can we, in the U.S. construction industry, do to prepare for its effects and mitigate the potential harm to our people and our projects?  The ultimate solutions may be complex, but there are some simple, initial steps, that construction contractors and owners should take to assess and bolster their ability to deal with the potential impact of an outbreak. Read More >

For more information, contact Diana Parks and Ross Eberlein.

Additional Resources: Webinars

March 4 – Coronavirus and Employment Law

Employers are scrambling to determine how to respond to the COVID-19 outbreak as it expands in the United States. This webinar discusses employer obligations in response to the coronavirus.

March 26 – Upcoming Webinar: Legal Tools for Managing Cross-Border Risk in a COVID-19 World

Multinational companies and deal-makers need to adjust to the COVID-19 outbreak as it expands across Asia, the United States and rest of the world. Join our three China office heads for a discussion about:

  • Which legal issues to prioritize in your management of disruption to your manufacturing, transportation, and cross-border supply chains.
  • How and when to use force majeure and other doctrinal provisions to achieve your strategic goals.

The panel will also look at deal trends and business continuity planning, and provide guidance based on their experience helping clients through the coronavirus crisis in China, including Hong Kong.

Corporate Update

SEC Grants Regulatory Relief for Companies Affected by the Coronavirus; Urges Appropriate Disclosures

The SEC is giving publicly traded companies impacted by the coronavirus relief with respect to an assortment of filing obligations.  In most cases, they are given an additional 45 days to file certain disclosure reports that otherwise would have been due between March 1 and April 30, 2020. Companies seeking relief must provide a Form 8-K (or 6-K) by the later of March 16 or the original reporting deadline. The SEC may extend the time period for relief or provide additional relief as it deems appropriate. A statement from Chairman Clayton also reminded companies to disclose to investors their assessment of, and plans to address, risks to business and operations resulting from the coronavirus:

"We also remind all companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments. How companies plan and respond to the events as they unfold can be material to an investment decision, and I urge companies to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements. Companies providing forward-looking information in an effort to keep investors informed about material developments, including known trends or uncertainties regarding coronavirus, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements."

Along these lines, we have seen that reporting companies are quickly adding coronavirus risk factor language both in their forward looking statement disclaimers and in their risk factor disclosures (either stand-alone or as supplements to their Natural Disasters risk factors).  Let us know if you would like to see some of the examples we have been collecting.

For more information, contact Rachel Benedict.

Impact of Coronavirus on M&A Rep and Warranty Insurance

The spread of coronavirus will likely have a number of effects on the M&A market, but one immediate impact is the increased risk to buyers as it relates to insurance coverage for breaches of representations and warranties. Insurance is becoming an increasingly common way for buyers to protect against potential post-closing liability. However, such insurance policies have exclusions and exclusions related to the impact of COVID-19 may become prevalent. In a recent example, an insurer excluded coverage for any losses arising from the inability to fulfill customer orders based on disruptions in the supply chain as a result of the spread of the coronavirus. This exclusion was added even though the seller’s representations and warranties did not specifically address the coronavirus or supply chain disruptions. Buyers should be aware of this potential lack of coverage when performing diligence and negotiating the transaction documents.

Firm Highlights

News

Dorsey Recognized in Inaugural 2026 IAM/WTR Copyright 1000

Dorsey & Whitney LLP is pleased to announce its recognition in the inaugural edition of the Copyright 1000: The World’s Leading Copyright Professionals, published by IAM and World Trademark Review (WTR). Nine Dorsey attorneys were individually recognized, and the Firm’s Denver, Minneapolis, New York, Salt Lake City, and Seattle offices were recognized in the firm rankings. The following Dorsey attorneys were recognized in the inaugural guide: Lindsey Sadler Gregory Tamkin Charlene Krogh Evan Everist Jeffrey Cadwell Fara Sunderji Bruce Ewing Catherine Parrish Lake J. Michael Keyes The Copyright 1000 is the first dedicated ranking focused solely on the world’s leading copyright practitioners. The guide identifies leading copyright firms and practitioners across key jurisdictions worldwide. Dorsey’s intellectual property attorneys advise clients on a wide range of copyright matters, including protection, enforcement, licensing, litigation, transactions, and issues involving emerging technologies and digital content. The inaugural Copyright 1000 rankings are published by IAM and WTR.

Insights

Energy Law: Month in Review - September 2026

Welcome to Dorsey’s Energy Law: Month in Review. We provide this update to our clients to identify significant developments in the previous month. Please reach out to any of the authors, listed above, to discuss these issues. Regulatory Developments Massachusetts Ratchets Up State and Local Regulation of AI Data Centers In early September, Governor Maura Healey of Massachusetts signed an executive order requiring that artificial intelligence data centers secure the approval of local communities as a precondition to proceeding with a given project. According to the terms of the order, data center developers will need to secure a “community benefits agreement” as a precondition to receiving permits from numerous state agencies, including the Department of Environmental Protection, the Energy Facilities Siting Board, and the Massachusetts Environmental Policy Act Office. Beyond requiring community benefits agreements, the order also mandates that developers mitigate utility costs to consumers, prohibits the use of nondisclosure agreements, and requires various state agencies to develop measures to limit data center impacts on the environment. North Carolina Regulators Decline Approval of Duke Energy Gas Turbine On September 18, 2026, North Carolina Utilities Commission (NCUC) denied Duke Energy’s application for a certificate of public convenience and necessity required to construct a gas-fueled combustion turbine at its Smith Energy Complex in North Carolina. The NCUC objected strongly to the $584 million price tag and noted that Duke appeared to be constructing the facility “based on anticipated data center customer additions.” The NCUC rejected that anticipated growth as “insufficiently reliable for the Commission to act at this point.” In rejecting Duke’s application, the NCUC also noted that Duke had signed the White House Ratepayer Protection Pledge, in which it represented that it would not shift data center costs to consumers. The NCUC observed that the record did not demonstrate how Duke “intends to adhere to its commitments under the Ratepayer Protection Pledge with regard to the Proposed Facility.” Notably, commission staff had actually supported the construction of the turbine, citing concerns about Duke’s reserve margins. The NCUC noted that it “understands the Public Staff’s expressed concerns,” but those concerns were outweighed by the NCUC’s reservations, including questions of demand. Department of Energy Approves Funds for Grid Improvement The U.S. Department of Energy (DOE) recently announced that it would fund 31 grid-improvement projects in 26 states. The funding initiative is part of the DOE’s “SPARK” initiative. The funding will include $1.9 billion in federal funding from DOE and $3.35 billion in recipient cost-sharing funding. The funds will go to projects designed to improve grid reliability and lower electricity costs. Recipients plan to reconductor over 1,500 miles of transmission lines and will deploy grid-enhancing technologies across approximately 21,000 miles. DOE stated that this initiative will make available over 23 additional gigawatts of electricity. Texas Moderates Rules Governing Data Center Interconnection The Texas Public Utility Commission adopted new regulations governing large-load interconnections. The rules impose a flat study fee of $100,000 for all proposed interconnections, which departs from the initial proposal to impose study fees using a tiered system based on project size. Additionally, the final rule eliminates the PUC’s previous proposal to impose a non-refundable interconnection fee of $50,000 per MW of contracted peak demand. The final rule also moderates the initially proposed regulations governing Electric Reliability Council of Texas (ERCOT) notifications for large-load customers’ non-utilized capacity. The proposed rules would have required notifying ERCOT within 30 days of missing a scheduled energization milestone by six months. The final rules, however, do not require informing ERCOT unless a scheduled energization milestone is missed by 24 months. FERC Denies TransAlta 202(c) Cost-Recovery Plan The Federal Energy Regulatory Commission (FERC) recently rejected TransAlta’s plan to recover $19.9 million in expenses stemming from a DOE order in which DOE prohibited TransAlta from retiring its coal-powered Centralia power plant. TransAlta had previously intended to retire the facility at the end of 2025. TransAlta’s cost recovery plan proposed spending an additional $23 million on repairs to continue operating the unit. FERC’s main objection had to do with geographic scope. TransAlta’s recovery plan called for recovering costs from California Independent System Operator (CAISO) and the Southwest Power Pool (SPP), but the DOE’s order requiring operation of the plant was designed to ensure reliability in the Northwest assessment area (Montana, Oregon, Washington, and parts of northern California and northern Idaho). Accordingly, FERC was unwilling to allow cost recovery from CAISO and SPP when the order that precipitated the additional costs only related to the Northwest assessment area. FERC informed TransAlta that it would only approve cost recovery from load-serving entities in the Northwest assessment area. FERC’s decision comes amid a rush of DOE emergency orders requiring the continued operation of coal-fired generating units. Litigation Appeals Court Upholds Washington Hydropower Plant With Caveats In a September 21, 2026, opinion, the Washington Court of Appeals largely upheld a Clean Water Act water quality certification by the Washington Department of Ecology for the Goldendale Energy Storage Project, a proposed pumped-water storage hydropower system adjacent to, but off-stream from, the Columbia River. A nonprofit (Columbia Riverkeeper) and the Confederated Tribes and Bands of the Yakama Nation appealed the certification, contending that it failed to impose necessary conditions and monitoring requirements to protect the water quality of the Columbia River. Most saliently, the plaintiffs argued that the project had the potential to leak 100 acre-feet of water per year into tributaries of the Columbia River. The Court of Appeals broadly rejected plaintiffs’ challenge to the state’s conclusion that “the project was designed not to leak.” That said, the Court of Appeals did reverse on one narrow issue. Specifically, the court determined that the state’s conclusion that “leakage from the project’s tunnels would be monitored and reported” was not supported by the evidence because the certification “does not explicitly require monitoring and reporting to determine whether there is any leakage.” Accordingly, the court remanded the matter to the state to impose monitoring and reporting requirements but otherwise affirmed the certification. Legislative Developments California Legislates Restrictions on Data Center Energy Use and Grid Costs On September 21, 2026, California Governor Gavin Newsom signed seven bills broadly regulating data centers in the state. SB 1168 directed the California Public Utilities Commission to assess the energy used by data centers. It also requires the PUC to pass costs of transmission and distribution upgrades and load increases on to data centers, rather than customers. SB 886 and SB 887 compel data centers to pay for infrastructure upgrade and generation costs, and wildfire mitigation costs, in addition to imposing environmental review. The statutes additionally increase local oversight of data centers. AB 1577 imposes a monthly reporting requirement that requires data centers to supply energy consumption and efficiency data to the California Energy Commission. AB 2383 contains incentives for data centers to use onsite clean energy generation. Finally, AB 2469 and AB 2619 require data center developments to assess water supply and develop a water scarcity plan. The statutes also mandate statewide water reporting as a precondition to obtaining and renewing business licenses.

Insights

SEC Proposes Expansion of Investment Adviser Performance-Based Compensation Rule

On September 30, 2026, the Securities and Exchange Commission (the “SEC”) proposed amendments to Rule 205-3 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), which provides an exemption from the general prohibition under Section 205(a)(1) of the Advisers Act on registered investment advisers receiving performance-based compensation (the “Proposal”) so long as performance-based compensation is limited to “qualified clients”.1 Most notably for private fund sponsors, the Proposal would expand the definition of “qualified client” to include any investors that satisfy the “accredited investor” definition under Regulation D. The Proposal may also have implications for private fund managers that rely on exemptions from investment adviser registration under state law because certain state-level investment adviser registration exemptions incorporate or otherwise reference the federal qualified client definition. Expansion of the Qualified Client Definition Under the current Rule 205-3, an investor generally may qualify as a qualified client if, among other alternatives, the investor has at least $1.4 million under management with the adviser or has a net worth exceeding $2.7 million. These thresholds are higher than the financial thresholds applicable to many accredited investors under Regulation D. As a result, an investor may currently qualify as an accredited investor for purposes of investing in a private offering without qualifying as a qualified client for purposes of paying performance-based compensation. The Proposal would expand the qualified client definition to include any natural person or legal entity investor that satisfies the accredited investor definition under Regulation D. The Proposal would also remove the assets under management and net worth thresholds under the current Rule 205-3 qualified client test. For private funds relying on Section 3(c)(1) of the Investment Company Act of 1940, this change could reduce the need to apply a separate qualified client standard to investors that already qualify as accredited investors. Dorsey Observations and Next Steps If adopted as proposed, the expanded qualified client definition could be particularly significant for private fund managers. Most private fund offerings are already limited to accredited investors under Regulation D. However, the Proposal could expand the pool of prospective investors available to emerging private fund managers while reducing the regulatory burden associated with complying with Rule 205-3. The Proposal could also benefit advisers operating below the SEC registration threshold that rely on a state private fund adviser exemption. A number of states have adopted exemptions modeled on the North American Securities Administrators Association (“NASAA”) private fund adviser exemption, which may condition relief for advisers to certain funds relying on Section 3(c)(1) on each beneficial owner satisfying the federal qualified client definition. However, state requirements vary, and any effect of the Proposal would depend on the text of the applicable state exemption and how it incorporates Rule 205-3. Many emerging private fund managers may have a larger network of accredited investor relationships than qualified client relationships during the early stages of their investment advisory business. Currently, under Rule 205-3, private fund managers may receive performance-based compensation from investors who do not satisfy the qualified client definition if those investors were admitted to their private funds prior to registration with the SEC. Following registration with the SEC, however, managers may continue to permit investors that are not qualified clients to invest in future private funds but may not receive performance-based compensation from those investors with respect to such investments. In addition, because the net worth and assets under management thresholds for qualified client status are adjusted for inflation every five years, the pool of qualified client investors may diminish over time as previously eligible investors no longer satisfy the applicable thresholds. The Proposal could provide the dual benefit of greater flexibility for private fund managers to establish and maintain relationships with accredited investors as their businesses scale and they become registered with the SEC, and greater flexibility for certain accredited investors to participate in investment strategies that historically have been restricted to much larger institutional investors. Unless and until the Proposal is adopted, investment advisers should continue to comply with the existing qualified client requirements. If the Proposal is adopted, private fund sponsors should consider whether corresponding changes are appropriate for their subscription documents, investor questionnaires, and other offering materials. Advisers that are state-registered or rely on a state-level exemption should also consult the laws and regulations of each relevant jurisdiction before changing investor eligibility standards or performance-based compensation practices, because adoption of the federal amendments may not automatically modify state requirements. Comments on the Proposal will be due 60 days after publication in the Federal Register. 1 Investment Adviser Performance-Based Compensation Modernization, Investment Advisers Act Release No. IA-7022 (Sept. 30, 2026), available at https://www.sec.gov/rules-regulations/2026/09/s7-2026-28#33-11443proposed.

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Insights

The Supreme Court Update - October 14, 2026

Regulatory Affairs Partner Jeff Beelaert Joins Dorsey in Boise

News

Regulatory Affairs Partner Jeff Beelaert Joins Dorsey in Boise

Regulatory Affairs Partner Randy Dann Joins Dorsey

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Regulatory Affairs Partner Randy Dann Joins Dorsey

Insights

The Supreme Court Update - October 8, 2026

On September 29, 2026, the Supreme Court granted certiorari in one case: Department of Homeland Security v. D.V.D., No. 26-426: This case concerns the Trump Administration’s “third-country removal” procedures, where immigrants are deported to countries not listed in the removal orders. In granting certiorari, the Court granted the Government’s application to stay a lower court decision halting the practice, which will allow third-country removals to continue pending resolution of the case. The issues presented are: (1) Whether the district court had jurisdiction over respondents’ claims; (2) whether the district court had authority to enter class-wide declaratory relief and APA vacatur under 8 U.S.C. § 1252(f)(1); (3) whether the Government’s guidance on third-country removals is unlawful under 8 U.S.C. § 1231(b), the due process clause, or FARRA/CAT and its implementing regulations; and (4) such other questions that the Government determines are appropriate for the proper disposition of the case. On October 1, 2026, the Court granted certiorari in three additional cases: Rhoney v. Barbosa da Cunha, No. 26-104: Immigration officials detained Ricardo Aparecido Barbosa da Cunha—a Brazilian citizen who had lived in the United States for approximately twenty years after entering without inspection—and denied him a bond hearing under 8 U.S.C. § 1225(b)(2)(A). The Second Circuit held that his detention was instead governed by § 1226(a), which permits release on bond, because § 1225(b)(2)(A)’s mandatory-detention requirement applies only to noncitizens apprehended while entering the country or shortly thereafter. The question presented is: Whether 8 U.S.C. § 1225(b)(2)(A) mandates the detention pending removal proceedings of aliens who, like Barbosa da Cunha, are present in the United States without having been admitted. Missionaries of St. John the Baptist, Inc. v. Frederic, No. 25-113: A Catholic religious organization sought to build a shrine to the Virgin Mary on land the organization owned adjacent to its church in Park Hills, Kentucky. Local zoning restrictions prohibited the proposed construction. The question presented is: Whether a land-use regulation that prohibits a religious institution from building a religious structure on its own property constitutes a “substantial burden” on religious exercise under the Substantial Burden Provision of the Religious Land Use and Institutionalized Persons Act, 42 U.S.C. § 2000cc(a). Marschner v. Marschner, No. 25-1349: Under the Uniformed Services Former Spouses’ Protection Act (“USFSPA”), a veteran’s longevity-based retirement pay can be divided in a divorce, but retirement pay based on disability and retirement pay that was waived to receive disability pay are indivisible. The question presented is: Does the USFSPA require state courts to refuse enforcement of indemnification provisions in a divorce settlement agreement?

Insights

EPA Limits Title V Re-Litigation of NSR Permits

Overview On September 25, 2026, the U.S. Environmental Protection Agency (“EPA”) published a final rule that significantly limits the ability of third parties to use the Clean Air Act (“CAA”) Title V permitting process to revisit New Source Review (“NSR”) permitting decisions years after those decisions were made. The rule establishes that NSR permitting determinations generally must be challenged during the original permitting proceeding, thereby providing regulated sources with greater permitting certainty and finality for major capital projects. Published in the Federal Register titled Clarifying the Scope of “Applicable Requirements” Under State Operating Permit Programs and the Federal Operating Permit Program (Docket ID No. EPA-HQ-OAR-2023-0401), the rule amends 40 C.F.R. Parts 70 and 71 to codify EPA’s interpretation regarding when requirements established under other CAA programs may be reviewed, modified, or implemented through the Title V operating permit program. The rule becomes effective 30 days after publication. The rule addresses two principal issues: (1) the relationship between NSR preconstruction permitting and Title V operating permits, and (2) the treatment of the General Duty Clause under CAA section 112(r)(1). Most significantly, the rule provides greater certainty for sources navigating the NSR permitting process. EPA’s amendments are intended to ensure that NSR permitting decisions made through an approved public process are generally not revisited later through Title V permit proceedings. The rule responds to a circuit split between the U.S. Courts of Appeals for the Fifth and Tenth Circuits. In Environmental Integrity Project v. EPA, 969 F.3d 529 (5th Cir. 2020), the Fifth Circuit upheld EPA’s interpretation, concluding that it was consistent with the text, structure, and purpose of Title V. In contrast, the Tenth Circuit reached the opposite conclusion in Sierra Club v. EPA, 964 F.3d 882 (10th Cir. 2020), finding that the then-existing regulatory definition of “applicable requirement” did not support EPA’s position. By amending the regulatory language on which the Tenth Circuit relied and codifying the interpretation approved by the Fifth Circuit, EPA has established a nationwide framework governing the interaction between NSR and Title V. NSR and Title V: EPA Establishes a Uniform Nationwide Framework At the core of the rule is EPA’s effort to define the respective roles of NSR and Title V. The rule codifies the approach EPA has applied since 2017: once a source obtains an NSR permit under an EPA-approved permitting program, and that permit was issued following public notice with an opportunity for comment and judicial review, the permit establishes the NSR-related “applicable requirements” of the State Implementation Plan (“SIP”) or Federal Implementation Plan (“FIP”) for Title V purposes. Under this framework, Title V is not a vehicle for re-examining underlying NSR permitting decisions. EPA does not intend to use the Title V process to revisit applicability determinations, emissions calculations, control technology determinations, permit conditions, or other issues resolved through the NSR permitting process. This principle applies regardless of the stage of the Title V proceeding; whether the NSR permit was issued pursuant to a SIP or FIP; the type of NSR issue involved; or whether the NSR permit is incorporated into Title V sequentially or concurrently. Limited Exceptions EPA recognizes several circumstances in which NSR issues may still be reviewed through the Title V program: No NSR permit was issued at all; The permit was issued without public notice and an opportunity for comment and judicial review; or The issue involves substantive overlap between Title V and NSR requirements, such as the adequacy of monitoring provisions. As a result, the rule does not insulate unpermitted projects or foreclose review of matters that independently arise under Title V. Key Regulatory Amendments The rule revises the definition of “applicable requirement” in 40 C.F.R. §§ 70.2 and 71.2. Paragraph (1): Where an NSR permit is issued with public notice and an opportunity for comment and judicial review, the permit establishes and defines the applicable SIP or FIP requirements for Title V purposes. Paragraph (2): All NSR permit terms, including terms contained in minor NSR permits, constitute applicable requirements that must be incorporated into Title V permits. Paragraph (4): CAA section 112(r)(1) (the General Duty Clause) is expressly excluded from the definition of “applicable requirement,” while section 112(r)(7) Risk Management Program requirements remain included. EPA also amended 40 C.F.R. §§ 70.8 and 70.12 to clarify that alleged defects in requirements established outside the Title V process generally do not provide a basis for EPA objection to a Title V permit or for a Title V citizen petition. General Duty Clause Exclusion The rule also codifies EPA’s longstanding position that the General Duty Clause in CAA section 112(r)(1) is not an “applicable requirement” for Title V purposes. EPA points to several considerations supporting that conclusion, including the distinction between the General Duty Clause and Title V permit terms, the provision’s origins in the Occupational Safety and Health Act’s general duty clause, and the different enforcement structures applicable to the General Duty Clause and Title V permit requirements. Importantly, excluding section 112(r)(1) from the definition of “applicable requirement” does not eliminate EPA’s authority to enforce the General Duty Clause independently of the Title V program. The final rule instead clarifies that the General Duty Clause need not—and should not—be incorporated into Title V permits as an applicable requirement. Practical Implications for Regulated Sources Greater Finality for NSR Permits  For projects requiring PSD, nonattainment NSR, or minor NSR permits, the permitting process becomes the primary forum for resolving disputes regarding applicability determinations, emissions calculations, control technology requirements, offsets, and permit conditions. Once an NSR permit is issued through a qualifying public process, regulated sources should face substantially reduced risk that those same issues will be challenged years later through Title V permit proceedings. Reduced Risk of Collateral Permit Challenges Stakeholders have sometimes sought to use Title V permit issuance, renewal, revision, or citizen-petition proceedings to challenge underlying NSR determinations. The final rule makes clear that Title V is not the appropriate vehicle for challenging whether an applicable requirement was correctly established in the first instance. This should reduce the risk of permit delays and uncertainty associated with collateral challenges to previously issued NSR permits. The rule does not, however, eliminate all Title V challenges relating to an NSR permit. Challenges concerning the Title V permit itself—including whether it appropriately incorporates applicable requirements or contains adequate compliance provisions—remain possible. Increased Importance of the Initial NSR Proceeding Because Title V generally will not provide a second opportunity to challenge the substantive validity of an NSR determination, the administrative record developed during the NSR process becomes increasingly important. Permit applicants should ensure that applicability analyses, emissions calculations, control technology evaluations, modeling demonstrations, and supporting technical documentation are thoroughly developed during the original permitting proceeding. For significant projects, applicants may therefore have an additional incentive to identify and resolve potential permitting issues before the NSR permit is issued rather than assuming that unresolved issues can be addressed during a subsequent Title V proceeding. Potential Incentive for Broader Public Participation EPA also notes that permitting authorities may choose to provide public notice and an opportunity for comment for a broader range of NSR permits because permits issued through a qualifying public process receive the benefit of the finality framework established by the rule. Some permitting authorities may conclude that greater public participation at the NSR stage is preferable to uncertainty during subsequent Title V proceedings. Conclusion The final rule is principally a permitting-certainty measure. For sources that obtain NSR permits through a public process, EPA has substantially limited the ability of third parties to revisit underlying NSR determinations through the Title V program. As a result, regulated entities should benefit from greater finality regarding key permitting decisions, reduced risk of collateral permit challenges, and increased certainty when planning and implementing capital projects.

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